The company, which had earlier admitted breaches of the 1974 Health and Safety at Work Act between January 1 1995 and October 5 1999, was also ordered to pay £225,000 towards prosecution costs.

Officials from Railtrack, the precursor to Network Rail, were warned at least five years before the collision that a set of signals was badly laid out and so difficult for drivers to interpret that a serious incident was likely to happen, the hearing was told.

The signals had been misinterpreted by drivers at least seven times in the previous five years, and had been the subject of internal inquiries.

The Paddington disaster, which was likened in court to a "senseless and unnecessary terrorist attack", would never have happened had it not been for a string of safety blunders.

Failures spanned several years and flowed from "the culture at the top" of the company, the court heard.

Passing sentence, Mr Justice Bean said Railtrack had admitted that its failure to carry out "adequate root cause analysis" of signals passed at danger (Spads) had been "systemic and unacceptable".

Quoting from his judgment, he added: "It was due, as counsel to the [Lord Cullen] inquiry submitted, to a combination of incompetent management and inadequate process, the latter consisting in the absence of a process at a higher level for identifying whether those who were responsible for convening such committees were or were not doing so.

"If a signal sighting committee had been convened, it would have found that SN [signal] 109 was unacceptable, not merely because of its non-compliance with the relevant group standards, but also of the inferior quality of its visibility."

Chris Newell, the principal Crown Prosecution Service legal adviser, said Railtrack had been held accountable for the "disastrous and inexcusable failures" that caused the tragedy.

Denman and Maureen Groves, who lost their daughter, Juliet, in the crash, said it was "plain from quite early on" who was to blame for the disaster.

"Now we believe the truth has been heard in court," they said. "But still there are those who should have been brought to court today to stand trial for manslaughter.

"They go unpunished for their gross negligence that killed our beloved daughter Juliet and 30 others. The worrying thing is they still work for Network Rail."

The Network Rail chairman, Ian McAllister, said the company was "very sorry for the failings of Railtrack some seven years ago that contributed to the tragedy at Ladbroke Grove".

"Network Rail accepts the fine imposed by the court today," he added. "The events of Ladbroke Grove will always be remembered, and our thoughts must remain with the families and friends of the 31 people who lost their lives on that tragic day and those that were injured."

The court heard that one Railtrack official had gone as far as to assure First Great Western Trains and the rail drivers' union Aslef that he had ordered an expert review into the safety of the controversial signal when he had in fact not done so.

Another official was so concerned he sent a colleague an email warning of "a big one". He asked that it be deleted once read.

At 8.11am on October 5 1999, his fears were realised when the Thames Trains service, leaving Paddington, passed signal SN109 at red and drove into the path of the First Great Western Trains flyer, which was travelling from Cheltenham.

Both drivers belatedly realised they were on a collision path but were unable to stop and crashed at 130mph.

At the hearing, Philip Mott QC said "a catalogue of failures to act over a number of years" had "left one signal in an inadequate state and continually missed by experienced and inexperienced drivers".

Mr McAllister said new systems that would prevent a repeat of the disaster were in place.

"The railways have seen huge change since 1999," he added. "Network Rail took over from Railtrack in 2002 and completed the installation of an automatic train braking system that would have prevented the Ladbroke Grove tragedy.

"This system ... will automatically apply a train's brakes if it passes a signal at red or approaches one too quickly."